Egypt's hopes for "bread, freedom, and social justice" are being overwhelmed by the slow pace of economic change. Egypt has been relying on wealthy neighbors for unconditional cash injections so that it can import food and fuel. Qatar's recent infusion of $3 billion may provide temporary relief, but such measures scare investors and postpone the fiscal consolidation that Egypt needs to stabilize its economy. The need for reform is urgent: Unemployment is above 13 percent and one-quarter of the population is living in poverty. Although Mohamed Mursi's government is nervous about imposing new costs on Egyptians, deferring reforms will only worsen conditions and make the necessary adjustments more painful.

Short-term interest rates in China's interbank market jumped to historic highs recently. The move raised questions about the competence of the country's monetary policymaking, growth prospects, and the trajectory of economic reform under President Xi Jinping and Prime Minister Li Keqiang. The view that the People's Bank of China (PBoC) was caught by surprise and was slow to react, however, is unfounded. The PBoC deliberately allowed rates to rise as a shot across the bow of midsized financial institutions that were borrowing heavily in the short-term interbank market to finance longer-term loans. The message of these recent developments in China's money markets is that broader interest rate reform is coming, with positive impact on China's state businesses to result.

New obstacles to the European banking union have emerged over the last year, but a successful transition remains necessary and possible. The European Central Bank (ECB) gains supervisory authority over most of Europe's banking system in late 2014, but first there must be a rigorous balance sheet assessment that is likely to trigger significant bank restructuring, for which preparation has not started. This step will be more consequential than current discussions about a bank resolution directive and bank recapitalization by the European Stability Mechanism (ESM). The ECB's new authority, accompanied by a later change in the European treaties to establish the legal basis for a union, will serve as a bridge to a sustainable banking policy framework for Europe.

Challenges to America's export potential will not be addressed by even the most ambitious free trade agreement (FTA). Reform is also required at home, starting with help for more than 300,000 American small business firms that directly export goods and services to foreign markets and account for a third of US merchandise exports. FTAs help lower their costs by eliminating tariffs, cutting red tape at the border, and simplifying international payments. But the United States should act to help small businesses by improving trade infrastructure and access to finance.

The impact of monetary policy depends on what a central bank buys, and which institutions it transacts with. The Federal Reserve and the Bank of Japan are already putting this principle into action with success. It is time for the United Kingdom's monetary policy committee (MPC) and its new governor to observe these examples, and buy securitized bundles of small, medium, and new enterprise debt. The Bank of England's new Governor Mark Carney and the MPC will be tempted to make an announcement that rates will not rise until certain targets are met, but stopping at cheap talk will not be enough.

The prospect that Ben Bernanke, chairman of the US Federal Reserve, could withdraw some of the liquidity provided to the United States and the rest of the world has created uncertainty and currency panic in India. But the rupee crisis might have a silver lining. With elections looming, the government's ability to pursue an ambitious and proactive reform agenda is limited. The elections will be closely contested and add to pressures on the government to spend on popular programs. These may be countered by external pressures driven by the rupee crisis. Such a constraint may strengthen the hands of reformers within government.

US-European Trade Talks Start: Part II
Jeffrey J. Schott says disclosures about US internet and telephone spying and France's desire to protect homegrown entertainment could make it harder to reach a deal.